E.s.m. Trustee Sues Ohio Financier, Associate For $12 Million

October 01, 1985|By United Press International.

FT. LAUDERDALE, FLA. — The trustee for the bankrupt estate of E.S.M. Government Securities filed a lawsuit Monday seeking the return of about $12 million from Ohio financier Marvin Warner and former Home State Savings President Burton M. Bongard.

The suit, filed in United States District Court in Ft. Lauderdale by E.S.M. trustee Thomas Tew, accuses Warner and Bongard of pocketing the money in violation of federal and state securities laws. It accuses the two men of civil theft and engaging in ``a pattern of racketeering activity`` in doing business with the collapsed bond dealer.

Warner, who served as ambassador to Switzerland under President Jimmy Carter and is part owner of the U.S. Football League`s Birmingham Stallions, could not be reached immediately for comment. He previously has denied he profited from inside knowledge at E.S.M.

The suit says Warner, Bongard and Home State Savings ``intended to defraud`` the government bonds dealer, which collapsed March 4 owing two dozen creditors more than $315 million.

Tew is seeking the return of $6.5 million from Warner and of $5.45 million from Bongard.

The suit says E.S.M. officials juggled their records so that Warner, Bongard and Home State Savings managed to post a profit in nearly every financial transaction they conducted with E.S.M.

``Warner and Bongard and Home State maintained securities accounts at E.S.M. ostensibly for the purpose of trading and investing in government securities,`` the suit said. ``In reality, those accounts were nothing more than conduits for the transfer of monies, with no consideration, from E.S.M. to defendants Warner and Bongard, and to Home State at a time when Home State was suffering severe financial difficulties.``

The suit said the payments made by E.S.M. to Home State enabled Home State to report net losses of $1.17 million in 1981 and of $1.137 million in the first half of 1982, when its true net losses for those periods were $6.524 million and $4.675 million, respectively.

Warner, according to the suit, made at least 37 securities transactions between March, 1980, and April, 1983, in which he ``did not pay to E.S.M. any margin, put up any equity or take any risk.`` Every transaction was profitable for Warner, it alleged. He earned $1.79 million, the documents said.

The suit said Home State Savings made 62 similar transactions, and all but two were profitable. Those two were ``long-term transactions in which E.S.M. officers were unable to create a profit for Home State.`` Home State`s profit was $16.59 million, the suit said.

Bongard made at least 54 transactions, all but one were profitable, and he pocketed $2.36 million, the suit said.

The lawsuit is the latest in trustee Tew`s efforts to recover some of the millions of dollars creditors lost when E.S.M. went bankrupt.